Avid Insurance Services has launched its first A-rated GAP insurance product into the retail auto market.
Steve Duxbury, head of ancillary motor at Avid, said the move marked a “big vote of confidence” in the UK GAP market.
According to the group, the launch highlighted Avid’s strategy to “bring profitable underwriting to what has been a challenging sector in recent years and to build long term sustainable partnerships with Avid’s new capacity”.
The Avid GAP product, which has received approval from Lloyds, will now be offered to customers initially through three online retailers, after FCA created a four day deferral period which has enabled customers to “shop around” rather than purchase from a car dealer.
Duxbury said: “It’s vital for market confidence that we provide stability for ancillary segments and apply the same disciplined approach to underwriting as elsewhere; achieving this will attract more A-rated paper and create a virtuous circle for the MGA model.
“Publicity given to GAP from consumer champions like Martin Lewis has made GAP a better understood product. Combined with the FCA changes, the result is growth in the online GAP market, not just via retailers but also through the aggregators, which started selling GAP two years ago.”
In addition, he explained that the “huge growth” in motor financing variations as well as increased consumer awareness was behind the popularity of GAP, with PCP arrangements, accounting for 63% of all finance deals.
He added: “This will become the norm, driven by the success of Cazoo and Carwow, and the challenge is for mainstream dealers to catch up, including how they sell financial services add-ons like GAP.
“Previously GAP insurance has often been underwritten by offshore, unrated GAP insurers who withdrew from the market when they stopped making money. Our A-rated product will give retailers and customers much more confidence in GAP.”